Tax on Early Plan Distributions

[PT]

Normally distributions from an IRA or qualified retirement plan are subject
to a 10% penalty tax unless an exception applies. But I seem to recall that
governmental plans aren't "qualified plans" - that is, they're not subject
to IRS approval or scrutiny.

So suppose a taxpayer received a separation payout from the California
Teachers' Retirement System. None of the exceptions in the Form 5329
instructions apply. Is this distribution subject to the 10% penalty?

--
PT

[Paul Maffia]

And you would be wrong. Although there may be exceptions most state plans
are qualified plans and the usual rules for the type of plan apply.
"PT" <x...@xyz.com> wrote in message
news:f61o51$g4u$1...@nwnexus-news.nwnexus.com...

[Archmedes]

http://www.calstrs.com/Help/faqs/TaxInfofaqs.aspx#10
See the bottom of the page...Tax Considerations for Rollovers

[Paul Thomas, CPA]

"PT" <x...@xyz.com> wrote

> Normally distributions from an IRA or qualified retirement plan
> are subject to a 10% penalty tax unless an exception applies. But I seem
> to recall that governmental plans aren't "qualified
> plans" - that is, they're not subject to IRS approval or scrutiny.

But they are to a lesser degree.

> So suppose a taxpayer received a separation payout from
> the California Teachers' Retirement System. None of the
> exceptions in the Form 5329 instructions apply. Is this
> distribution subject to the 10% penalty?

Yes it is. Of course, you could roll this over to an IRA and avoid the tax
for a few more years.

--
Paul A. Thomas, CPA
Athens, Georgia